Shenanigans outfox reform of pay-to-play contracts

Those are the stated legal guideposts by which tens of millions of dollars in contracts are awarded annually by New Jersey municipalities, school districts, counties and local authorities.

“Competitive.”“Fair and open.”

What could possibly be better than that?

Closer looks at the reality behind the reassuring legal language have concluded: almost anything.

“Competitive contracting” and “fair and open process” in reality are signposts marking loopholes through which local politicians can steer tax-funded deals to favored firms — often political contributors.

The loopholes evade “pay-to-play” reforms aimed at curbing the role of politics in public contracts. These are reforms local politicians adopted themselves, often with fanfare.

The loopholes keep thousands of local contracts worth $100 million or more potentially in political play, despite reforms purporting to do just the opposite.

The “fair and open” loophole in the state’s pay-to-play law was eliminated in 2006. That was not long after the law went into force. The loophole, however, lives on in many local-pay-to-play measures adopted by five counties and 159 municipalities.

The Office of the State Comptroller spotlighted the loophole in a report 15 months ago and urged that it be eliminated as it was at the state level. But there’s been anything but a stampede by local officials to do so.

The Comptroller’s Office says only two jurisdictions it is aware of have closed the loophole — the Bergen County government and Fair Lawn, a Bergen town — although Peter McAleer, spokesman for Comptroller A. Matthew Boxer, acknowledges there may be others.

The State Department of Community Affairs says it has no numbers on local responses to what the Comptroller’s report labeled “weaknesses” and “flaws” in municipal-level efforts to stem politics in public contracts.

Gov. Christie, some legislators and the state Election Law Enforcement Commission (ELEC), have joined the comptroller in voicing support for the elimination of the loophole. So far, however, to not avail — even though the comptroller warns that the status quo leaves “few hurdles for wrongdoers to overcome.”

Public contracts in 2011 exceeded 23,000 in number and $5 billion in total value — over $2 billion of that total local. Contractors made a declining but still hardly insignificant $9.6 million in political contributions that year, according to ELEC.

New Jersey’s anti-pay-to-play measures require all businesses with public contracts of $50,000 or more to report their public deals and political donations to ELEC. Those whose contracts exceed $17,500 are barred from contributing more than $300 to gubernatorial candidates and various political committees, state and local.

But local officials — whether municipal, school, county or authorities — may and do circumvent their own pay-to-play restrictions by awarding non-sealed-bid deals packaged as “pursuant to a fair and open process” and wrapped with a ribbon of “competitive-contracting” provisions.

The state uses documented evaluation and specific criteria in making its deals for professional services such as accountants and engineers. Professional contracts typically involve selection factors in addition to cost. But the state comptroller’s office says it found, in reviewing local contracts, that officials sometimes don’t follow a documented evaluation process and apply vague criteria open to manipulation — occasionally skipping cost as a consideration altogether.

This may not only squeeze out competitors who lack political connections. It may also make it all but impossible for them to challenge a questionable contract award, according to the Comptroller’s office. Treasury officials says competitors are often the most alert and aggressive watchdogs on contracts because of their detailed knowledge and direct stake in the outcome.

The Comptroller’s office says that local-level professional contracts likely “easily exceed” $100 million a year. So the upshot of the “fair and open” loophole is that a huge pot of local property tax dollars is left exposed to potential political grabs. (New Jersey has the highest local property taxes on average in the country.)

Greasing the skids on possible contracting shenanigans is a further provision of purported pay-to-play reforms. Under this provision, officials awarding a contract declare that they themselves have the “final decision” on “what constitutes a fair and open process.”

“Through this provision” — according to the Comptroller’s so-far evidently largely ignored report — “local governments are granted the exclusive authority to determine whether their own selection process complies with the law.”